The 12 Most Important Lessons
In Retailing
Every Year Thousands of Potentially Successful Retailers Fail Because of Poor Skills
It is clear that specialty store owners must get serious about operating their businesses, or be prepared to accept stagnant revenues. If you apply the following these "details of operating your retail business", you'll improve the odds of success. They are based on years of research and the actual experience of dealing with hundreds of small to medium-sized retailers in every region of the country who have reached an unprecedented high level of success.
1. Know Yourself
Having your own business is more than just creating a job for yourself. To be a successful retailer, there are many personal sacrifices and you have to be willing to make them. Your basic roles are marketing, merchandising, finance, administration, and the responsibility of personnel. To get the best results, it is rare for one person to play all these roles equally well. You must know which parts you can handle yourself -- and which parts you're going to need help with.That's why it's important to be objective and take a close look at your overall strengths and weaknesses. Ask yourself the following questions:
Do you have special skills critical for success?
Are you adaptable to changing conditions?
Can you take advice from other people?
Do you have a proven plan to attract customers?
Do you always obtain information to help run your business?
2. Plan Ahead
Many stores are run by well-intended people who are not informed about their own operations. As a specialty store owner, if you don't know the ins and outs of running your business, you'll soon be out of business. According to leading authorities, the main reason 80% of all new businesses fail within the first five years is not money, but the lack of the right information and knowledge. If you want to succeed, the trick is to know how to make right the decisions by implementing an effective business plan. Remember, if you fail to plan, and you might as well plan to fail.
3. Know The Industry
You can gain the greatest competitive edge if you understand the intimate knowledge of doing business. The critical difference is to be able track those obstacles that challenge your future survival: The Competition: Your competitors, size, services, location, marketing approach, type of customers, suppliers, and pricing strategies. The Market Environment: Your local business climate, vacancy rate of commercial space, median household income, level of education, age groups, ethnic population, and the demographics of your potential customers. To thrive and prosper, you must be committed to learn, be clear about your objectives, and have the desire and energy to accomplish your goals.
Does your area have a population base large enough to support you and the nearby competitors? Should you try to appeal to a wider range of customers rather than a small segment of the market? Have you seen competitive changes taking place that have affected where customers are shopping?
4. Understand Your Customer
Are you listening to your customers? Make it your business to give your customers what they want, and they will do business and buy from you. They are the reason you are in business, and your future depends on them. The products and services you provide should be in direct reflection to their needs. Think in your customers' terms; buy, show, sell, and say things that interest them, not just what interests you. Don't forget, it is the customer that determines whether or not you succeed.
Do you know the reasons why customers shop at your store? (service, convenience, quality, price?) Do you seek suggestions from your best customers on ways you can boost business? Do you use a store questionnaire to aid you in determining your customers' needs? Do you ever try to re-establish lost or inactive customers? How can you increase your market share?
5. Keep Good Financial Records
If you don't know where your money is going, it will soon be gone. The "game of business" is played with computers -- and the score is evaluated in dollars and cents. Good financial records are like the instruments on an airplane, they keep you posted of your height, direction, and speed. Without them you're flying blind with no controls to guide you to your destination. If you know how much you're spending, buying and selling, you can take control and make your business more money.
Have you computerized your business to streamline everyday tasks and business procedures?
Do you use sales forecasts, expense sheets, and financial statements on regular basis? Do you evaluate your operating expenses on a regular basis?
6. Manage Your Cash
It doesn't matter how unique your store is, your business can't survive without cash flow. Cash is the lifeblood of your business. The money coming into or out of your store is the vital component that keeps your business financially healthy. A monthly Cash Flow Statement shows the amount of money at the start of a period and then shows how much cash was received from various sources and the reasons it was paid out. If you budget wisely and know the interval of your monthly income and expenses, you won't have to worry about running out of money. Watch your monthly overhead and operating expenses ratios. Make a budget and follow an open-to-buy plan to eliminate overbuying. Buy closer to the selling season to minimize the risk of making a bad buy. Don't accept deliveries you can't use or arrive after the completion date.
7. Use Sound Management Practices
As store owner, you are also a manager. This means knowing how to run your business from the top to the bottom. You have to make decisions, offer customer service, manage time and resources, and know how to merchandise and run the business better than anyone working for you. Value your employees, they're your most valuable asset. Train your employees and provide them with the confidence and skills to do their jobs better. Give your employees the opportunity for growth, treat them fairly, pay them what they're worth, and they will help make your business successful.
Do you train your employees to service and work with customers in a professional manner? Do you have a program to reward your employees for their extra efforts and innovative ideas? Do you empower employees to make important decisions, even if it means losing money?
8. Develop A Distinctive Image
Your image is important and links all the areas of your business together. It is the reality of your customers' perception of your company name, web site, location, products, prices, visual merchandising, signs, displays, business cards, invoices, newsletters, advertising material, customer service, and anything else that relates to your business. Right or wrong, your image can be a "make it or break it" situation.
Is your business distinctive and does your merchandise fit into a niche that competitors don't have? Do you use newsletters to remind customers of the products or services you provide? Do you implement proven concepts and formulas of other successful retail firms? Do you grade your store's location every year in regard to appearance and accessibility?
9. Control Your Inventory
The function of your inventory is to generate sales. All retail stores need to manage inventory. It is your money sitting on a shelf and represents a large portion of your business investment. The small retailer who merely watches the store's shelves can't maintain a proper balance between the right amount of merchandise and probable customer demand. That retailer's buying and selling will suffer through lack of information concerning color, size, trends, and customer preferences. Without adequate control, slow-moving inventory becomes dated, shopworn, damaged, and very costly. Do you evaluate the amount of inventory you carry, and fine tune your operating expense ratios on a regular basis? Generally, inventory controls can be summarized as follows: Matching the stock on hand with customers' needs. Controlling the investment in inventory. Minimizing markdowns. Controlling shortages. Improving purchasing procedures.
10. Buy and Price For Profit
To fully understand the nature of retailing, one must start with the concept that the original price of your merchandise is nothing more than a temporary estimate of what the customer is willing to spend. Most stores use a "keystone" (double) markup that applies to their products or services. What they lack is a pricing strategy based on an item-by-item calculation for regular, promotional, and off-price merchandise.
To become more competitive, join buying groups and seek out manufacturer discounts that allow you to purchase merchandise at below wholesale prices. By offering the new price-conscious consumer better values, you'll be able to: attract more customers, improve your average sales transaction and offer customers more opportunities to visit your store. Do you test different aspects for promoting business: new offers -- new items -- new prices?
Do you identify different vendor performance, mark-up, and turnover? Do you use a system for tracking those products that are your best-sellers? Have you tried to increase sales by offering better prices, more value, or add-ons?
11. Market Your BusinessIt takes experience to master the skills of running a business.
First, you must learn How... Who... What... Where... and When to advertise to promote your business. Second, how to successfully manage and adjust to the ups and downs of the seasonal "profit cycles" that include: store inventory, markdowns, turnover, timing, deliveries, expenses, projected sales and consumer needs.Customers are your most valuable business asset. You can tally up your balance sheet & count all the inventory, put a price on your fixtures, estimate the lifetime value of your customers, look at the book value of your company, factor in goodwill -- and still completely miss the single most valuable thing -- CUSTOMERS!It's your money, so with expert planning, effective advertising and follow-through you'll be able to ensure lots of new customers, bigger sales and higher profits. A smart marketing and merchandising approach can maximize your business performance, while minimizing your time, effort, and risk.
12. Learn From The Pros
... And Ask For Help When You Need ItRemember, getting results is what counts! With outside advice and assistance, your quest for a major process of improvement can get a major jump start. Don't be too proud to ask for help, we all need help sometimes. It is important to recognize what you don't know can end up costing you money, hurt the odds of success, and greatly reduce the chance of achieving your business goals. And, most importantly, you'll have all the tools you need and a wonderful piece of mind.
POWER Retailing
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